Feds address 'out-of-control' spending on consultants by slashing Defence budget: report

Treasury Board President Anita Anand slashed the Department of National Defence (DND) budget by $211.1 million — the largest cut among all ministries, according to spending documents tabled in Parliament.

Feds address 'out-of-control' spending on consultants by slashing Defence budget: report
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Treasury Board President Anita Anand unveiled $500 million in spending cuts Thursday with mixed reviews. 

Anand’s former ministry, the Department of National Defence (DND), had its budget slashed $211.1 million — the largest cut among all ministries, according to spending documents tabled in Parliament.

On September 28, Chief of the Defence Staff Gen. Wayne Eyre and deputy defence minister Bill Matthews told the Commons defence committee that a proposed $1 billion budget cut over five years would hinder progress on spending 2% of its GDP on the military, while also undermining its operational capacity.

"This is something that we’re wrestling with now," said Eyre. Matthews estimated "nearly $900 million and change" in cuts that he expects will ramp up over the next four years.

The military’s budget for fiscal year 2023/24 is projected to be $26.5 billion, with total federal spending pegged at $490.5 billion — up from $479.4 billion as initially tabled. Those estimates could change following Finance Minister Chrystia Freeland’s fall economic and fiscal update on November 21.

In an interview with the Globe and Mail, Anand said the policy would not impact the operations of the Canadian Armed Forces (CAF). "We aren’t reducing the spending on our armed forces operations," she claimed. "This is asking government departments to look at their budgets and see where there is unnecessary spending."

The $500 million budget cut in spending reflects the total "savings" outlined in Budget 2023, as part of an interim plan to reduce travel and consulting fees by $15.4 billion over the next five years.

After National Defence, Procurement Canada identified $34.5 million in savings, followed by Foreign Affairs at $27.6 million. Immigration and Citizenship Canada will also be out $20.4 million, courtesy of the policy.

According to the budgetary document, A Made In Canada Plan, the Treasury Board looks to increase savings in these departments by $1.65 billion annually for the next four years. 

Freeland clarified on August 22 that "savings" meant reallocating spending to other programs, reported Blacklock’s Reporter. "The fiscal forecast in the budget that we tabled in the spring includes $15 billion in savings so we could fund the programs outlined in the budget," she said.

The biggest source of new spending in Thursday’s document is $9 billion for the Department of Crown-Indigenous Relations and Northern Affairs, reported the Globe. That includes $5 billion in funding for the Restoule settlement agreement with 21 First Nations in Ontario.

"How do you convince Canadians that you are serious about this?" asked a reporter. Freeland replied: "We are Liberals."

With pledged "savings," the federal government hopes to spend $7.1 billion less on consulting, other professional services and travel over five years starting this fiscal year. Cabinet in its budget last March 28 said it would "reduce spending on consulting."

A subsequent Inquiry Of Ministry tabled in the Commons November 3 disclosed Natural Resources Canada paid consultants with KPMG a total $669,500 for advice on saving money allocated for consultants.

On November 7, Anand said she did not sign off on the KPMG contract, reported Blacklock’s Reporter. "I have been working extremely hard," she claimed, while stressing the importance of new rules to control federal spending on consultants.

"That requires anyone considering using external consultants to ensure they follow those guidelines including undertaking a review of whether those services can be performed within the Government of Canada and also to ensure this is absolutely necessary," added Anand.

Thursday’s report shows the Department of Natural Resources will cut $8.7 million from this year’s budget for travel and outsourcing.

On January 30, witnesses forewarned the Commons government operations committee about the 'uncontrolled' spending on consultants. "It’s hard to tell from the publicly available data what a given contract was for," testified Sean Boots, senior policy adviser with the Treasury Board. 

According to Blacklock’s Reporter, the practice created a "shadow public service" unaccountable to taxpayers, said the Professional Institute of the Public Service in their submission to the Commons government operations committee.

"That’s especially true for management consulting firms that provide a very wide range of services to government departments," added Boots. "Especially for large IT projects, one management consulting firm might be hired to oversee the work of another management consulting firm."

Per Thursday’s report, federal departments and agencies spent $16.7 billion on consultants last year. Overall, the fees allocated to consultants rose as the feds increased their payroll by 30% from 195,600 employees in 2015 to 254,300 last year.

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